Bank of England officials not talking of reversing QE - Carney
- Author: Zachary Reyes May 11, 2018,
May 11, 2018, 0:31
The pound lost 0.8% to 1.3503 against the greenback, down from a weekly high of 1.3617 seen at 6:30 am ET. Only a week later, the first quarter GDP (gross domestic product) print came in at a tepid 0.1 percent quarter on quarter, below consensus of 0.4 percent and the BOE's own forecast of 0.3 percent. In February, Mr Carney said rates might need to rise somewhat faster than markets had expected. Previously the cost of borrowing had been decided between the chancellor and the governor of the Bank. All members agree that any future increases in Bank Rate are likely to be at a gradual pace and to a limited extent.
"If it were being actively discussed, you'd see it in the minutes (of policy meetings)".
Investec said: "With a rate hike now seemingly off the table, the market will be focused on the rationale for the BoE's abrupt U-turn having signalled a rate hike in March". The decisions are made after a vote by each committee member; in the event of a tie, the governor has the casting vote.
Manufacturing and the other sectors of the United Kingdom economy improved by the end of 2017, but they have taken a dive this year.
The Bank insists that the slowdown in the first quarter of the year was a temporary soft patch and that the underlying economic fundamentals remain strong. However, the reality has been slowing retails sales, a deteriorating high street and a quarter with the weakest economic growth since 2012 suggesting that the economy is far from in recovery mode.
The MPC's updated projections for inflation and activity are set out in the May Inflation Report.
"We think the momentum in the economy is going to reassert", he told reporters in London, adding, "The Monetary Policy Committee judges that an ongoing, modest tightening of monetary policy over the forecast period will be appropriate to return inflation sustainably to its target".
On growth, the BoE said "very little spare capacity remains in the economy", which grew only 0.1% in the first quarter, down from 0.4% in the fourth quarter of 2017, hampered by poor weather. This was a outcome of the snow-impacted activity in Q1, which saw growth for that quarter come in at just 0.1% quarter over quarter in the preliminary estimate.
Chris Williamson, chief business economist at IHS Markit, said the fact that the Bank kept its medium-term outlook unchanged 'leaves expectations alive for rates to rise later in the year'.
But the Bank's quarterly forecasts revealed there was some doubt around the underlying economic picture in the United Kingdom, clouded by the recent weather impact, with the Bank noting "greater-than-usual uncertainty" over consumer spending.